Vermont System Planning Committee

Vermont System Planning CommitteePresented by: John Athas, Patty RichardsLa Capra Associates, Inc.

Presented to:

December 8, 2010

Vermont CHP and Customer Sited Generation Potential StudySummary Presentation to the Vermont System Planning Committee

VSPC Summary Presentation – December 8, 2010 2

AGENDA

1. Introduction to the Project and La Capra Associates Team

2. Study Scope and Objectives

3. Study Approach

4. Results

5. Study Conclusions

6. Q&A


1. Introduction to the Project and La Capra Associates Team

Section 1:

VSPC Summary Presentation – December 8, 2010

VSPC issued an RFP to perform a study of the potential in Vermont for Electricity Generation from Combined Heat and Power and Customer-Sited Generation.

La Capra Associates and Stantec Consulting Services teamed up to perform the Study.

La Capra Associates performed modeling and estimates of potential. Stantec Consulting Services provided combined heat and power (CHP)

cost and technical assumptions.

Team members included: La Capra Associates: Dick Hahn, John Athas, Patty Richards,

Barb Stoddard, Melissa Whitten, Mary Neal, Zach Myer, and Jeff Bower Stantec Consulting Services: Jim Stone, Dan Kelley

4

1. Introduction to the Project and Team


2. Study and Scope Objectives

Section 1:


Identify and learn from existing CHP installations in Vermont. Identify CSG most likely to be available to Vermont consumers. Identify technical and economically achievable potential of CSG. Identify barriers to the deployment of CHP and suggest how to overcome

those barriers. Scope Definition: Customer-Sited Generation (CSG)

Customer-sited renewable energy generation (CREG) Backup- or peak reducing generation (PRG) Combined heat and power (CHP)

Customer-Sited Generation is also defined for this study as being limited to the size of the peak demand of the specific customer.

6



Vermont Load Zone Map

7



Peak Reducing Generation (PRG) is the least expensive Customer-Sited Generation option to avoid or delay transmission projects.

Societal and customer economics of CHP are poor without natural gas available to fuel the CHP equipment, marginal in some applications with natural gas.

Existing CHP is not being utilized by the host customer in many cases. Customer-Sited Renewable Energy Generation resulted in limited

potential assuming existing level of incentives continue. CSG potential did not uncover significant resources that would likely

have better economics than transmission projects. CHP and renewable energy are site-specific; more detailed studies

would be required to identify specific candidates.

8

The Executive Summary



Estimate the potential and the cost of customer- sited generation (CSG) resources in Vermont.

Technical Potential Economic Potential

Economics will be examined using the three forms of resource planning tests as well as customer economics.

Societal Cost Total Resource Cost Utility Cost

Provide information to be used to assist the state and electric utilities in assessing whether Combined Heat and Power (CHP) and customer-sited generation may be viable alternatives to transmission projects (NTAs).

Supply Curves by Zone

9

Study Key Objectives



3. Study Approach

Section 1:


CSG studied from two perspectives:

1. CSG Customer Economics Payback Internal Rate of Return Net Present Value

2. CSG Potential as an Electric System Resource Societal Cost Basis Net Cost to Reduce Peak Demand

11

Overall Approach

3. Study Approach


Combined Heat and Power (CHP)

Reciprocating

Steam turbine generators (STGs)

Combustion turbine generators (CTGs)

Microturbines

Fuel Cells

12

Customer-Sited Generation Technologies

3. Study Approach

Renewable Energy Generation

Wind turbine generators

Solar photovoltaic (PV)

Farm methane


Recipr

ocati

ng E

ngine

Steam Turb

ine w

ith N

ew B

oiler

Combu

stion

Turbine

Microtu

rbine

Fuel C

ell

Wind 10

0 kw

Solar P

V

Farm M

ethan

e$0

$1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000

Installed Cost of CHP and PRG CSG TechnologiesCHP/Renewable PRG

Inst

alle

d Co

st ($

/kW

)

Figure 5: Installed Cost of CHP and PRG CSG Technologies

CSG Installed Cost Comparison

3. Study Approach


Recipr

ocati

ng E

ngine

Steam Turb

ine w

ith N

ew B

oiler

Combu

stion

Turbine

Microtu

rbine

Fuel C

ell

Wind 10

0 kw

Solar P

V

Farm M

ethan

e$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

Levelized Cost of CHP and Renewable CSG Tech-nologies

CHP on Distillate Fuel/Renewable CHP on Natural Gas Fuel

Leve

lized

Cos

t ($/

kWh)

Figure 6: Levelized Cost of CHP and Renewable CSG Technologies

CSG Installed Net Cost of Electricity Comparison

3. Study Approach


4. Results: Existing CSG

Section 1:


Observations A number of the 26 units are no longer operating. Developed and conducted a telephone survey. Eight customers contacted and six

returned our call. Of the six CHP customers participating only two were actually operating their units.

For offline units, respondents most-often cited economics (too expensive) and equipment reliability issues as the reasons for shutting down the CHP units.

16

Table 5: State of Vermont Existing Combined Heat and Power Plants

Existing CHP in Vermont



Economics Equipment Reliability Staffing Requirements Thermal Demand Natural Gas Access Non-economic factors can play a role in keeping CHP going:

Lack of reliability of electric grid Social Mission

17

Existing CHP – Feedback Non-Operating Facilities



Table 6: State of Vermont Existing Customer-Sited Renewable Energy Generation

Table 7: State of Vermont Existing Customer-Sited Renewable Energy Generation

Existing Customer-Sited Renewable Energy Generation in VT



4. Results: Overall Projections for CSG

Section 1:


Technical Potential PRG Equal to the commercial and industrial peak demand within a zone. CREG Renewable-based technical potential is defined by the population of

customers for which the technology could be installed without regard to cost.

CHP Defined in this study as the sum of the optimum-sized CHP units for each customer defined sub-segment.

Economic Potential PRG Amount of PRG technical potential estimated to have lower total net costs

than CHP and peak load greater than 10 kW.CREG Developed using historic rates of implementation of projects in Vermont

and we therefore, refine the definition to being market potential in the study.

CHP Economic potential cut-off comes when the Net Cost to Reduce Peak for CHP equals the cost of PRG.

20

Study Definition Of Technical Potential



Conclusions1. There are limited customer-sited generation options which have net

benefits under the societal test and therefore the potential to avoid significant transmission projects is limited.

2. The results of our analysis show significant technical potential but low levels of economic potential for CHP and CREG. There are approximately 62 MW of CHP and between 14 MW and 28 MW of CREG economic potential.

3. The customer-sited PRG has the best chance for significant development to reduce peak load if its costs compete favorably relative to transmission alternatives and other non-transmission alternatives.

21

Study Overall Conclusions



From Table 8



4. Results: CREG

Section 1:


Farm Methane Conclusions and Limitations1. Technical Potential: 176 farms and 15 MW2. Market Potential between 22 and 44 farms for a total of 1.9 MW to

3.7 MW over 20 years3. Did not include discount for lack of three phase distribution.

4. Did not take into account economic pressures in the dairy industry and the reduction of dairy farms into the future.

5. Used past rates of installation as indicator for future rate of development.

6. Based on past financial incentives; future incentives could be higher or lower.

24

Conclusions – Customer-Sited Renewable Energy Generations

4. Results: CREG


Solar Photovoltaics Conclusions & Limitations1. Technical Potential: 292 MW2. Market Potential between 9.1 MW and 18.2 MW over 20 years which

would be installed at over 1,619 to 3,236 customer sites, respectively.3. Projection of market potential is a generalized estimate; data has a number

of limitations.

4. Assumed past rate of development will continue into the future at an equal pace, however the past installation rate is uncertain.

5. Incentives and funding sources may not be the same as in the past.

6. Did not consider technology advances or lower future costs of solar on an installation basis.

7. Actual effectiveness of intermittent solar generation resources for use in transmission planning analyses could be as low as zero depending upon the timing of the peak load reduction required.

25


4. Results: CREG


Wind Conclusions and Limitations1. Technical Potential: 22 MW over 20 years2. Market Potential between 2.8 MW and 5.6 MW over 20 years which would

be installed over 294 to 588 customer sites, respectively.3. Additional data and study would be needed in order to refine the estimate of

the number of customers living in a location with sufficient wind to provide better results.

4. Wind classes are not uniformly distributed across the landscape and people tend to live away from high wind locations.

5. Did not consider technology advances or lower future costs of small wind on an installation basis.

6. Actual effectiveness of intermittent wind generation resources for use in transmission planning analyses could be as low as zero depending upon the timing of the peak load reduction required.

26


4. Results: CREG


4. Results: PRG

Section 1:


Conclusions1. Peak reducing generation has widespread technical potential in

Vermont.2. In most customer locations peak reducing generation has a lower net

cost than CHP.3. Peak reducing generation must be compared to utility or system -scale

peaking generation to determine if it is the most economic way to alleviate transmission planning identified needs.

4. Current markets for demand response program capacity do not provide enough economic benefits to make it economic for customers to install PRG unless an acute reliability concern exists for the customer.

28

Study Conclusions – PRG

4. Results: PRG


Technologies Reciprocating Engines Microturbines Fuel Cells

Technical Potential Observations based on Customer Size Distributions in each zone

Economic Potential Metrics determined ‘similar’ to CHP

– Peak Reduction costs = Installed cost minus NPV (Avoided Capacity Costs minus required annual O&M if required)

Supply Curve– A function of technology and size

29

Peak Reducing Customer-Sited Generation

4. Results: PRG


$0

$500

$1,000

$1,500

$2,000

$2,500

0 100 200 300 400 500 600 700 800

Net

Cos

t ($/

kW)

Cumulative MW

Supply Curve for Customer Sited Peaking Units

Figure11: State of Vermont – Supply Curve for Customer-Sited Peaking Units

Vermont State-wide Supply Curve for PRG

4. Results: PRG


4. Results: CHP

Section 1:


1. CHP is likely to have an extremely limited role in NTA analysis.2. CHP has widespread technical potential in Vermont, although in most

instances the costs far exceed conventional and PRG alternatives.3. CHP in zones with natural gas has reasonable, although marginal, economic

potential measured as a percent of technical potential.4. In most customer locations CHP generation would have an optimum size that

is a significant portion of customer’s peak demand.5. CHP, if natural gas supply is not available at the customers location, is a

higher cost choice than peak reducing generation as a means to alleviate transmission planning identified needs.

6. Customer economics for installing CHP are poor even with large percentage of installation costs being provided by incentives, making incentive-induced customer-initiated installations minimum at best and close to zero over the next 10 years.

7. The economic potential of CHP could approach zero if the customers within a load zone have poor thermal match characteristics, despite reasonably high customer thermal consumption.

32

Study Conclusions – CHP

4. Results: CHP


0 100,000 200,000 300,000 400,000 500,000 600,000$0.00$0.05$0.10$0.15$0.20$0.25$0.30$0.35$0.40$0.45

State of VermontCHP Net Cost to Provide Electricity

Cumulative CHP Capacity (kW)

$/kW

h

Figure 7: State of Vermont Cumulative Supply Curve for CHP in Vermont: Net Cost to Provide Electricity

CHP State of Vermont Supply Curves

4. Results: CHP


0 100,000 200,000 300,000 400,000 500,000 600,000-$5,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

State of VermontTotal Net Present Value of Total Cost of CHP

Total Societal Cost Run as Peaker

Cumulative CHP Capacity (kW)

$/kW

Economic Potential

Technical Potential

Figure 8: Illustration of CHP with Technical and Economic Potential

State of Vermont Supply Curve

4. Results: CHP


The returns and paybacks of CHP, even with incentives would not provide sufficient stimulus to implement CHP.

35

-$100

$100

$300

$500

$700

$900

$1,10

0

$1,30

0

$1,50

0 -

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

State of Vermont: Effect of Utility Incentives on Customer Economics of CHP

3-year Payback kW5-year Payback kW7-year Payback kW

Incentive Level ($/kW)

Pote

ntia

l Cap

acity

for V

erm

ont

(kW

)

Figure 9: State of Vermont: Effect of Utility Incentives on Customer Economics of CHP

CHP Host Customer Economics

4. Results: CHP


Reciprocating Engine Steam Turbine Generators_New Boiler/STG

0

100,000

200,000

300,000

400,000

500,000

600,000

Base Case: Technology Composition of CHP Technical Potential

Technology

kW

Figure 10: Base Case: Technology Composition of CHP Technical Potential

Technology Make-up of CHP Technical Potential

4. Results: CHP


Naturally, the economics of CHP are very sensitive to the thermal characteristics of the customer including not only how much, but also when the thermal loads occur.

From Table 10

CHP Sensitivity Analysis

4. Results: CHP



Section 1:


Peak Reducing Generation (PRG) is the least expensive Customer-Sited Generation option to avoid or delay transmission projects;

Societal and customer economics of CHP are poor without natural gas available to fuel the CHP equipment, marginal in some applications with natural gas;

Existing CHP is not being utilized by the host customer in many cases; Customer-Sited Renewable Energy Generation resulted in limited

potential assuming existing level of incentives continue CSG potential did not uncover significant resources that would likely

have better economics than transmission projects; and CHP and renewable energy are site-specific; more detailed studies

would be required to identify specific candidates.

39

Recap of Major Take-Aways



6. Q & A

Section 1:


6. Q&A


One Washington Mall 9th Floor Boston, MA 02108www.lacapra.com617-778-5515

Contact Information:

John Athas Patty [email protected] [email protected]

277 Blair ParkSuite 210Williston, VT 05495www.lacapra.com 802-861-1617

Thanks!

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